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Global equity markets caught a bid over the fourth quarter of 2021 as corporate earnings came in better than expected and the delta variant of the coronavirus began to subside. During Q4, the LOM Stable Income Fund gained +4.61%. Over the past year, the Fund provided a total return (inclusive of monthly dividends) of +14.21%, outperforming its benchmark by 3.38%.
Most advanced economies continued their mid-cycle expansion during Q4, with a broad reopening supporting activity. However, supply constraints and disruptions detracted from overall growth momentum, and many developing countries were restrained by more limited vaccination progress. China slipped into a growth recession amid significantly decelerating activity.
US consumers are in solid shape, having experienced the highest net worth and lowest debt-service obligation on record. Historic monetary and fiscal stimulus boosted housing and financial asset prices, drove interest rates downward, and delivered direct fiscal transfers which helped generate record savings gains. Higher inflation remains a challenge, but pent-up demand appears to be offering steadying mid-cycle influence.
Corporate earnings surprised to the upside for the fourth quarter in a row. Sales growth accelerated amid faster nominal growth and greater corporate pricing power. Market expectations for 2021 earnings were revised upward to a robust 45% year-over-year growth rate, but expectations for 2022 ticked down. The ability to maintain high margins amid rising wage and input costs remains key to the corporate earnings outlook.
In Q4, higher dividend-paying stocks fared well as the Dow Jones Dividend Select Index advanced by 7.75% and the Dow Jones Global Dividend Select Index rose by 2.37%. Hybrid securities were essentially flat over the period but the underlying securities continued to pay good coupons. As of the end of the period, the portfolio was allocated 63% dividend-paying equities, 30% hybrids and 6% high yield debt.
The information contained in this article is for information purposes only, and represent the views of the author. It is not intended as specific investment or financial advice, or a recommendation or solicitation to buy or sell any security. Any investments or strategies listed in this article may not be suitable for all investors. Past performance is not indicative of future performance, and as with any investment, prices may fluctuate. It is recommended that advice is sought from a qualified investment professional prior to implementing any financial plan. LOM has made every effort to ensure that the contents herein have been compiled from sources believed reliable, however LOM does not warrant the accuracy, adequacy, timeliness, or completeness of this information expressly disclaims liability for errors or omissions in this information.
